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5 Relative Price Strength Plays to Keep for Your Buy List
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After a brief spell of relative calm, volatility has returned to Wall Street as market participants fret about a higher interest regime for a longer period and the possibility of a recession in 2023. With the January to mid-February welcome rally slowly fading away, it seems that investors’ confidence in risky assets like equities has been dampened to some extent.
As it is, fears of higher interest rate hikes flared up following the above-consensus readings of the consumer price index and the producer price index of January. Apart from demonstrating the stickiness with which inflation is present in our current environment, this also indicates that the central bank has to go a long way to tame the price rise.
In short, several strong economic data notwithstanding, the Fed’s tighter monetary control and higher interest rate regime is unlikely to terminate any time soon. Add to that the softness in consumer spending and looming signs of a slowdown. Therefore, volatile trading in U.S. markets is expected to continue for some time.
In the current jittery market environment, investors who might want to stay exposed to the equity setup should focus on good investment opportunities. One of the ways such potential plays could be identified is to look for signs of relative price strength.
Relative Price Strength Strategy
Whether a stock has the potential to offer considerable returns is determined primarily by its earnings and valuation ratios. Simultaneously, it is essential to check whether its price performance exceeds its peers or the industry average.
Upon such comparison, if we find that a stock is unable to match up to wider sectoral growth despite having impressive earnings momentum or valuation multiples, it may be better to avoid it.
However, those outperforming their respective industries or benchmarks should be included in your portfolio since they have a higher chance of securing significant returns. Picking a stock that outperforms its peers ensures that you have a winning option on your hands.
Then again, it is imperative that you determine whether or not an investment has relevant upside potential when considering stocks with significant relative price strength. Stocks delivering better than the S&P 500 for 1 to 3 months at least and having solid fundamentals indicate room for growth and are the best ways to go about this strategy.
Finally, it is crucial to find out whether analysts are optimistic about the upcoming earnings of these companies. In order to do this, we have added positive estimate revisions for the current quarter’s (Q1) earnings to our screen. When a stock undergoes an upward revision, it leads to additional price gains.
Screening Parameters
Relative % Price change – 12 weeks greater than 0
Relative % Price change – 4 weeks greater than 0
Relative % Price change – 1 week greater than 0
(We have considered those stocks that have been outperforming the S&P 500 over the last 12 weeks, four weeks and one week.)
% Change (Q1) Est. over 4 Weeks greater than 0: Positive current-quarter estimate revisions over the last four weeks.
Zacks Rank equal to 1: Only Zacks Rank #1 (Strong Buy) stocks — that have returned more than 26% annually over the last 26 years and surpassed the S&P 500 in 23 of the last 26 years — can get through. You can see the complete list of today’s Zacks #1 Rank stocks here.
Current Price greater than or equal to $5 and Average 20-day Volume greater than or equal to 50,000: A minimum price of $5 is a good standard to screen low-priced stocks, while a high trading volume would imply adequate liquidity.
VGM Score less than or equal to B: Our research shows that stocks with a VGM Score of A or B, when combined with a Zacks Rank #1 or 2 (Buy), offer the best upside potential.
Here are five of the 14 stocks that made it through the screen:
Omnicom Group Inc. (OMC - Free Report) : It is one of the largest advertising, marketing and corporate communications companies in the world. The 2023 Zacks Consensus Estimate for this New York-based OMC indicates 1.3% year-over-year earnings per share growth. Omnicom has a VGM Score of A.
Over the past 30 days, Omnicom saw the Zacks Consensus Estimate for 2023 move up 11.1%. It beat the Zacks Consensus Estimate for earnings in each of the last four quarters. OMC shares have gained 12% in a year.
Everest Re Group, Ltd. : Based in Hamilton, Bermuda, Everest Re Group writes property and casualty, reinsurance and insurance in the United States, Bermuda and international markets. RE’s expected EPS growth rate for three to five years is currently 24.4%, which compares favorably with the industry's growth rate of 13.4%. Everest Re Group has a VGM Score of A.
Notably, RE beat the Zacks Consensus Estimate for earnings in each of the last four quarters. The company has a trailing four-quarter earnings surprise of 18.4%, on average. Everest Re Group shares have gone up 30.6% in a year.
Sunoco LP (SUN - Free Report) : Sunoco participates in the transportation and supply phase of the U.S. petroleum market across a number of states. Over the past 30 days, the Dallas, TX-based company saw the Zacks Consensus Estimate for 2023 move up 9.8%. SUN has a VGM Score of B.
SUN beat the Zacks Consensus Estimate for earnings in two of the last four quarters. The company has a trailing four-quarter earnings surprise of 21.6%, on average. Sunoco stock has gained 15.7% in a year.
Textron Inc. (TXT - Free Report) : The company manufactures aircraft, automotive engine components and industrial tools. The 2023 Zacks Consensus Estimate for this Providence, RI-based firm indicates 21.7% year-over-year earnings per share growth. TXT has a VGM Score of A.
Textron beat the Zacks Consensus Estimate for earnings in each of the last four quarters. It has a trailing four-quarter earnings surprise of roughly 13.9%, on average. TXT shares have gained 6.1% in a year.
Post Holdings, Inc. (POST - Free Report) : It is a consumer-packaged goods holding company, which is involved in the production of center-of-the-store, refrigerated, foodservice, food ingredient and convenient nutrition product categories. Post Holdings has a VGM Score of B. Over the past 30 days, Saint Louis, MO-based POST saw the Zacks Consensus Estimate for fiscal 2023 move down 10.6%.
Post Holdings beat the Zacks Consensus Estimate for earnings in each of the trailing four quarters, the average being 34.8%. Valued at around $5.4 billion, POST has surged 59.8% in a year.
You can get the rest of the stocks on this list by signing up now for your 2-week free trial to the Research Wizard and start using this screen in your own trading. Further, you can also create your own strategies and test them first before taking the investment plunge.
The Research Wizard is a great place to begin. It's easy to use. Everything is in plain language. And it's very intuitive. Start your Research Wizard trial today. And the next time you read an economic report, open up the Research Wizard, plug your finds in, and see what gems come out.
Disclosure: Officers, directors and/or employees of Zacks Investment Research may own or have sold short securities and/or hold long and/or short positions in options that are mentioned in this material. An affiliated investment advisory firm may own or have sold short securities and/or hold long and/or short positions in options that are mentioned in this material.
Disclosure: Performance information for Zacks’ portfolios and strategies are available at: https://www.zacks.com/performance.
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5 Relative Price Strength Plays to Keep for Your Buy List
After a brief spell of relative calm, volatility has returned to Wall Street as market participants fret about a higher interest regime for a longer period and the possibility of a recession in 2023. With the January to mid-February welcome rally slowly fading away, it seems that investors’ confidence in risky assets like equities has been dampened to some extent.
As it is, fears of higher interest rate hikes flared up following the above-consensus readings of the consumer price index and the producer price index of January. Apart from demonstrating the stickiness with which inflation is present in our current environment, this also indicates that the central bank has to go a long way to tame the price rise.
In short, several strong economic data notwithstanding, the Fed’s tighter monetary control and higher interest rate regime is unlikely to terminate any time soon. Add to that the softness in consumer spending and looming signs of a slowdown. Therefore, volatile trading in U.S. markets is expected to continue for some time.
In the current jittery market environment, investors who might want to stay exposed to the equity setup should focus on good investment opportunities. One of the ways such potential plays could be identified is to look for signs of relative price strength.
Relative Price Strength Strategy
Whether a stock has the potential to offer considerable returns is determined primarily by its earnings and valuation ratios. Simultaneously, it is essential to check whether its price performance exceeds its peers or the industry average.
Upon such comparison, if we find that a stock is unable to match up to wider sectoral growth despite having impressive earnings momentum or valuation multiples, it may be better to avoid it.
However, those outperforming their respective industries or benchmarks should be included in your portfolio since they have a higher chance of securing significant returns. Picking a stock that outperforms its peers ensures that you have a winning option on your hands.
Then again, it is imperative that you determine whether or not an investment has relevant upside potential when considering stocks with significant relative price strength. Stocks delivering better than the S&P 500 for 1 to 3 months at least and having solid fundamentals indicate room for growth and are the best ways to go about this strategy.
Finally, it is crucial to find out whether analysts are optimistic about the upcoming earnings of these companies. In order to do this, we have added positive estimate revisions for the current quarter’s (Q1) earnings to our screen. When a stock undergoes an upward revision, it leads to additional price gains.
Screening Parameters
Relative % Price change – 12 weeks greater than 0
Relative % Price change – 4 weeks greater than 0
Relative % Price change – 1 week greater than 0
(We have considered those stocks that have been outperforming the S&P 500 over the last 12 weeks, four weeks and one week.)
% Change (Q1) Est. over 4 Weeks greater than 0: Positive current-quarter estimate revisions over the last four weeks.
Zacks Rank equal to 1: Only Zacks Rank #1 (Strong Buy) stocks — that have returned more than 26% annually over the last 26 years and surpassed the S&P 500 in 23 of the last 26 years — can get through. You can see the complete list of today’s Zacks #1 Rank stocks here.
Current Price greater than or equal to $5 and Average 20-day Volume greater than or equal to 50,000: A minimum price of $5 is a good standard to screen low-priced stocks, while a high trading volume would imply adequate liquidity.
VGM Score less than or equal to B: Our research shows that stocks with a VGM Score of A or B, when combined with a Zacks Rank #1 or 2 (Buy), offer the best upside potential.
Here are five of the 14 stocks that made it through the screen:
Omnicom Group Inc. (OMC - Free Report) : It is one of the largest advertising, marketing and corporate communications companies in the world. The 2023 Zacks Consensus Estimate for this New York-based OMC indicates 1.3% year-over-year earnings per share growth. Omnicom has a VGM Score of A.
Over the past 30 days, Omnicom saw the Zacks Consensus Estimate for 2023 move up 11.1%. It beat the Zacks Consensus Estimate for earnings in each of the last four quarters. OMC shares have gained 12% in a year.
Everest Re Group, Ltd. : Based in Hamilton, Bermuda, Everest Re Group writes property and casualty, reinsurance and insurance in the United States, Bermuda and international markets. RE’s expected EPS growth rate for three to five years is currently 24.4%, which compares favorably with the industry's growth rate of 13.4%. Everest Re Group has a VGM Score of A.
Notably, RE beat the Zacks Consensus Estimate for earnings in each of the last four quarters. The company has a trailing four-quarter earnings surprise of 18.4%, on average. Everest Re Group shares have gone up 30.6% in a year.
Sunoco LP (SUN - Free Report) : Sunoco participates in the transportation and supply phase of the U.S. petroleum market across a number of states. Over the past 30 days, the Dallas, TX-based company saw the Zacks Consensus Estimate for 2023 move up 9.8%. SUN has a VGM Score of B.
SUN beat the Zacks Consensus Estimate for earnings in two of the last four quarters. The company has a trailing four-quarter earnings surprise of 21.6%, on average. Sunoco stock has gained 15.7% in a year.
Textron Inc. (TXT - Free Report) : The company manufactures aircraft, automotive engine components and industrial tools. The 2023 Zacks Consensus Estimate for this Providence, RI-based firm indicates 21.7% year-over-year earnings per share growth. TXT has a VGM Score of A.
Textron beat the Zacks Consensus Estimate for earnings in each of the last four quarters. It has a trailing four-quarter earnings surprise of roughly 13.9%, on average. TXT shares have gained 6.1% in a year.
Post Holdings, Inc. (POST - Free Report) : It is a consumer-packaged goods holding company, which is involved in the production of center-of-the-store, refrigerated, foodservice, food ingredient and convenient nutrition product categories. Post Holdings has a VGM Score of B. Over the past 30 days, Saint Louis, MO-based POST saw the Zacks Consensus Estimate for fiscal 2023 move down 10.6%.
Post Holdings beat the Zacks Consensus Estimate for earnings in each of the trailing four quarters, the average being 34.8%. Valued at around $5.4 billion, POST has surged 59.8% in a year.
You can get the rest of the stocks on this list by signing up now for your 2-week free trial to the Research Wizard and start using this screen in your own trading. Further, you can also create your own strategies and test them first before taking the investment plunge.
The Research Wizard is a great place to begin. It's easy to use. Everything is in plain language. And it's very intuitive. Start your Research Wizard trial today. And the next time you read an economic report, open up the Research Wizard, plug your finds in, and see what gems come out.
Click here to sign up for a free trial to the Research Wizard today
Disclosure: Officers, directors and/or employees of Zacks Investment Research may own or have sold short securities and/or hold long and/or short positions in options that are mentioned in this material. An affiliated investment advisory firm may own or have sold short securities and/or hold long and/or short positions in options that are mentioned in this material.
Disclosure: Performance information for Zacks’ portfolios and strategies are available at: https://www.zacks.com/performance.